Proposals to Ban Letting Agent Fees in Wales

On 27 June 2017 the Welsh Government’s legislative priorities for the coming year (2017-18) were outlined in an annual statement by the First Minister, Carwyn Jones. It included news that the Welsh Government will take legislative action to tackle the fees charged to tenants in the private rented sector.

“We will introduce a Bill to prevent unfair fees from being charged to tenants and prospective tenants. This will provide those in the private rented sector with clarity about the costs involved and ensure the system is fair, equitable and sustainable.”

“As set out in the Consumer Rights Act, since November 2015 all letting agents in Wales must publicise their fees, so if this isn’t happening then we need to see more enforcement and greater resources to ensure Council’s prosecute those agents who aren’t adhering to the rules.”

The Consultation

On 19 July the Welsh Government launched its consultation on the fees charged to tenants in the private rented sector.

Communities and Children Secretary, Carl Sargeant AM, said:

“I want to know the extent of the fees charged, what those fees cover and understand the implications of the removal of these fees for letting agents, landlords, tenants and any third parties involved in the private rented sector.”

It’s vital that members give their views on proposals to change the way fees are charged by letting agents, landlords and third parties to tenants.

The consultation seeks views on the nature and level of fees being charged to tenants. It seeks to determine which fees, if any, are justifiably being charged to tenants. It also seeks information on fees paid by landlords to agents, and also on the possible consequence of banning fees.

Our Response to the Consultation

“Any move to ban letting agents fees in Wales will cause unprecedented damage to the rental sector across the country. Independent analysis commissioned by ARLA Propertymark, following the UK Government’s announcement of its own ban, revealed that if a full ban was introduced, rents will increase by £103 per year which will only serve to financially punish long term tenants.

“In our submission, ARLA is calling for fees associated with referencing to be left out of any ban. Right to Rent checks will soon be a service that agents in Wales will be required to undertake by law so it is only right that agents should be able to recover the associated costs, given the time and resources needed to carry out such checks.”

Our Position

ARLA Propertymark does not support the banning of letting agents charging fees to tenants. We believe fees should be open, transparent and reasonable.

Letting agent fees represent legitimate costs to the business that need to be covered.

Letting agents deliver a valuable service in ensuring that properties are safe, compliant and professionally managed.

Fees are charged to tenants to reflect real work that is undertaken on behalf of them, including checking references, drawing up tenancy agreements, conducting credit checks and general administration.

If fees to tenants are banned outright landlords are likely to pass on higher agents’ fees to tenants in the form of higher rent.

If less professional and part-time landlords turn away from agents due to increasing costs, they will likely be unaware of new (and existing) legal requirements, causing widespread non-compliance and putting tenants in danger. This could put added pressure on local authorities as tenants look for assistance.

Private landlords are an important source of investment in housing stock and a worsening of their financial position will likely result in less investment.

Some would-be landlords are likely to be put off by the increased costs that may be demanded by letting agents, and together with the withdrawal of mortgage interest rate relief and additional stamp duty, this will likely reduce the number of new entrants. This will put upward pressure on rents.

Research

As part of ARLA Propertymark's Tenant Fees campaign, we commissioned evidence on the likely economic impact of the ban in England and Wales from leading consultancy Capital Economics.

Our research shows that the average fee charged by an ARLA Propertymark Protected agent is £202 per tenant.

Total turnover in the residential lettings sector in England and Wales is around £4 billion and it employs around 58,000 workers.

Official statistics show that real estate activities in England and Wales provided employment for 241,000 people in 2015 (6,500 in Wales and 19,000 in the South West).

Fees charged to tenants generate around £700 million per year or approximately 20% of the industry's turnover.

What Are We Doing?

Following the announcement in November that the UK Government would ban letting agent fees to tenants in England, ARLA Propertymark wrote to the First Minister in Wales requesting a meeting to ensure that the Welsh Government understand all of the evidence around fees.

In March 2017, ARLA Propertymark wrote a joint letter with the Residential Landlords Association (RLA) to Carl Sargeant AM, the Welsh Communities Secretary, to press for a meeting to discuss the implications of the UK Government’s decision to ban letting agent’s fees to tenants and how any subsequent ban in Wales would affect the sector as a whole